Working remotely from Europe for a US company

[sergiosr]

Hi,

I am an Alaskan resident and I have dual citizenship (US & Cyprus which is part of the European Union). I am currently working remotely from Alaska for a company based in California. 

I have recently decided to move to Cyprus and my employer would like to keep me employed as a full time employee, and let me continue working remotely from Cyprus instead of Alaska.

Will my employer be able to have me working as a full time employee, with the same employment terms and can I continue paying taxes as if as I am living in Alaska, since that is the state that I have been paying taxes in the last 7 years? 

I do understand that a US citizen can work remotely from Europe for up to 3 months, since that is the period that a US citizen is granted a tourist visa to stay in Europe, but since I am a European Union citizen I don't have any visa restrictions.

Thank you!

Sergios

[Opus 17]

As long as you retain your US citizenship, you must file a US tax return and report all your world-wide income and pay US tax on it.  You can claim a deduction or credit for foreign taxes paid that reduces the impact of double taxation.

If you are overseas at least 330 days of the year, you can claim the foreign earned income exclusion and not pay any income tax on income earned overseas.  You still have to file a US tax return to report the income and claim the exclusion, and any unearned income (investments, interest etc) is still subject to US tax.

https://www.irs.gov/individuals/international-taxpayers/foreign-earned-income-exclusion

Once you move out of Alaska and establish a permanent residence overseas, you would not be subject to Alaska state tax since you would no longer be a resident of Alaska.  The key is that you are domiciled in Cyprus.  Your domicile is the place you call home. It is the place where you have significant family, social, and business ties. Such as, your pharmacy, your doctor, your attorney, your voter registration, your library card, your favorite mechanic, your church, and so on.  Even if you lease an apartment or buy a house in Cyprus, you might still be domiciled in Alaska, if you maintain most of your important ties there and plan to someday return.  Domicile is a tricky concept and there are few black letter rules that say where you are domiciled, it is a matter of your individual facts and circumstances.  

Anyway, if you establish your domicile in Cyprus, then you aren't an Alaska resident any more and don't need to file an Alaska return.  If you keep your domicile in Alaska, then you still probably owe state income tax, although you would have to review the rules on their web site. 

(In fact, I guess Alaska doesn't have personal income tax, so it doesn't really matter.  But the domicile rule would matter to other people reading this post who live in other states.  Your domicile and state residency might also impact your eligibility for permanent fund payments.  You will have to research this yourself or ask a local accountant.)

The IRS really doesn't care about your Visa status in Europe -- if you are a US citizen and you have income, you pay US tax on it regardless of whether or not you follow local laws. 

[sergiosr]

Hi Opus and thanks for your reply!

In my case, will I be able to continue working for my US employer as a full time employee or would I need to change my employment terms and be hired as a self-employed contractor, even though I will still be working like a full time employee (set schedule, 40 hours a week)?

Thank you!

[ronvdc]

Similar situation for me: dual American-Dutch (so E.U.) citizen, living in the U.S. and working for large IT company. We're thinking of going to the Netherlands for at least a year or so to give our kids the full Dutch experience, most likely during the 2022-2023 school year. I'll be able to continue to work for my current employer from the Netherlands. Would it be possible to remain formally employed with the U.S. company while I'm there, retaining my U.S. salary, etc., or would I need to formally switch to the company's subsidiary in the Netherlands if I live and work in the country for a certain amount of time. Does the IRS have any rules in that area, or does that all depend on what the rules in the Netherlands are?

There are no visa concerns, since I am a Dutch citizen in addition to a U.S. citizen.

Thanks!

--Ron

[Opus 17]

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@ronvdc wrote:

Similar situation for me: dual American-Dutch (so E.U.) citizen, living in the U.S. and working for large IT company. We're thinking of going to the Netherlands for at least a year or so to give our kids the full Dutch experience, most likely during the 2022-2023 school year. I'll be able to continue to work for my current employer from the Netherlands. Would it be possible to remain formally employed with the U.S. company while I'm there, retaining my U.S. salary, etc., or would I need to formally switch to the company's subsidiary in the Netherlands if I live and work in the country for a certain amount of time. Does the IRS have any rules in that area, or does that all depend on what the rules in the Netherlands are?

There are no visa concerns, since I am a Dutch citizen in addition to a U.S. citizen.

Thanks!

--Ron

---

As a US citizen, you are required to file a US tax return to report all your world-wide income, it doesn't matter if the employer is US-based or not.  You will get a credit on your US tax return for taxes you pay in the Netherlands, also regardless of which office pays you.  

It may be the case that if you switch your employment to a non-US employer, you won't be subject to social security and medicare tax, but that is beyond my expertise.  (If that is the case, it would also mean that you would not be eligible to contribute to an IRA, since you would not have US "earned income" and you would not build up credits toward retirement or disability for those quarters that you were exempt from those taxes.  You may want professional advice.)

If you are a bona fide overseas resident for at least 330 calendar days of a year, you may be eligible for the foreign earned income exclusion--this would mean that your income earned from working would be exempt from US tax, instead of being taxed and then subject to an offsetting credit.  I don't see that it is required that your employer also be foreign based, just that you legitimately be a foreign resident for that year.  But if you go to the Netherlands for a school year, you may never meet the 330 day rule anyway.

https://www.irs.gov/individuals/international-taxpayers/foreign-earned-income-exclusion 

[billtaiwan]

I'm in a similar position. I am not an employee, so I get a 1099-NEC from a California Company and I am a US citizen with permanent residence status in Taiwan and am working in Taiwan for them. However, shouldn't the income from the California company be considered foreign-earned? But, it doesn't show up that way in Turbo Tax. How do I get it to be recorded correctly? Do I list that income in the "Wages Adjustment" under "Confirm Your Foreign Wages Already Entered" and if so, is it a positive number?

[Opus 17]

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@billtaiwan wrote:

I'm in a similar position. I am not an employee, so I get a 1099-NEC from a California Company and I am a US citizen with permanent residence status in Taiwan and am working in Taiwan for them. However, shouldn't the income from the California company be considered foreign-earned? But, it doesn't show up that way in Turbo Tax. How do I get it to be recorded correctly? Do I list that income in the "Wages Adjustment" under "Confirm Your Foreign Wages Already Entered" and if so, is it a positive number?

---

As a US citizen, you are required to file a US tax return and pay US taxes on all your world-wide income.  

If you are physically absent from the US for at least 330 days of the year, this income would be eligible for the foreign earned income exclusion.  

https://www.irs.gov/individuals/international-taxpayers/foreign-earned-income-exclusion

Note that to be considered earned income, you must report this income on schedule C and pay self-employment tax on schedule SE.  This is not "foreign wages", it is self-employment income.  

Here are more links and tips

https://www.irs.gov/individuals/international-taxpayers/self-employment-tax-for-businesses-abroad

https://turbotax.intuit.com/tax-tips/general/filing-taxes-while-overseas/L8bP9GN5p

https://turbotax.intuit.com/tax-tips/military/filing-irs-form-1116-to-claim-the-foreign-tax-credit/L...

[LeonardS]

If you received a 1099-NEC you are considered to be self-employed and will report your self-employment on Form 1040 Schedule C regardless of where you perform your self-employment work.  Turbotax will calculate any self-employment tax you may owe based on your Schedule C entries. 

Once you have completed Schedule C and know your net income you will report that income on Form 2555.  If you qualify for the Foreign Earned Income Exclusion (FEIE) your self-employment will not be taxed.   Your income may be excluded from income tax but you will still have to pay any self-employment tax to exclude the income if you qualify.

To enter your income on Form 2555 follow these steps:

1. Open you account 
2. Type foreign income in the search box
3. Click on Jump to foreign income in the results box
4. Follow the screen prompts to enter your information

[billtaiwan]

Sorry, but that doesn't match what I'm experiencing unless I don't understand. 

First, I know that I do have to fill out a tax return and pay the Schedule C Self-Employment tax for social security. That's not a question for me. I'm only talking about the income tax. 

On the screen where it says "Enter Your Foreign Earned Wages," it then says "Enter your foreign earned wages not reported on a W-2 or not reported elsewhere." As I noted, I have a 1099-NEC so that income is reported elsewhere. If I add it again here, Turbo Tax doubles my recorded income. 

Can you be more specific?

Thanks for your help. 

[Vanessa A]

You will not report it in both locations only one.

  If you are an expat, then you would report it as foreign income and mark that it is self-employment income. You should see a screen that says did you make any money outside the US?

This screen says could be from a US company, reported on an IRS w-2 or 1099-Misc

Answer yes here then continue through to report your income.

This method will take you through the steps to exclude your income or take a foreign tax credit

If you are not an expat and do not qualify for the foreign earned income exclusion or foreign tax credit, then you would only report it on schedule C. 

[billtaiwan]

Thanks, that does help. And, yes, I am an expat with recognized Taiwan residence status. 

However, the next screen does say "Note: Your business income should already be reported in the Business Income section of TurboTax. Here, you should enter the amount of gross business profit that was earned while living and working overseas."

So, though your explanation makes the most sense, that seems to indicate that I do have to enter it in both places. TurboTax is really confusing in this area. And, in my case, I work in their office or do translation at home, so I have no other business expenses. That means that my income listed on the 1099 NEC is equal to my total profit.

Thanks for your patience.